August 6, 2019

Supreme Court: Questions referred to European Court of Justice on X v Kuoni

In considering an appeal resulting from the sexual assault of a hotel guest, the Supreme Court has unanimously concluded that guidance from the Court of Justice of the European Union is required. This referral will help determine whether the package holiday company, with whom the hotel guest booked, is liable for damages in breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations ("the Regulations"). 

This referral is unsurprising given the comprehensive and damaging implications of the decision for the travel industry if the appeal is granted.

Background

The claimant ("X") was sexually assaulted by a hotel employee whilst on a package holiday in Sri Lanka booked with Kuoni. The employee, a maintenance contractor, had offered to show X to the reception using a shortcut when the attack occurred.

X pursued damages from Kuoni in breach of contract and also under the Regulations.

At first instance in the High Court, X argued that the assault "amounted to the improper performance of a contractual obligation". It was accepted there was no basis on which her attacker should have been identified as a risk, nor was any systemic or operational failure on the part of Kuoni or the hotel alleged.

Kuoni admitted responsibility for proper performance of the contract, including supplier obligations. However, Kuoni denied that the assault constituted a breach of those obligations, whether in contract or pursuant to the Regulations.

Judge McKenna found there was no breach of contract; as section 5.10(b) of the Booking Conditions referring to "holiday arrangements" was not deemed to include maintenance staff conducting a guest to reception.

It was also held, obiter, that Kuoni would have been able to place reliance on the statutory defence contained within the Regulations, specifically 15(2)(c)(ii), as the failure or improper performance of the contract was due an event which could not have been foreseen or forestalled.

Court of Appeal

The appeal was dismissed by a majority, who held that the "holiday arrangements" of Clause 5.10(b) of the contract did not include "the hotel's maintenance team, known to be such to the hotel guest, conducting the guest to the hotel's reception". In addition, obiter, the employee was not considered to be a supplier for the purposes of the contract or the Regulations.

Lord Justice Longmore, dissenting, concluded that a member of staff offering to guide a guest was a service which Kuoni accepted responsibility for, and that service should have been completed to a reasonable standard.

Supreme Court

The Association of British Travel Agents was granted permission to intervene given the implications for the travel industry.

Two questions were placed before the Supreme Court:

  1. Did the assault of Mrs X constitute improper performance of the obligations of Kuoni under the contract?
  2. If so, is any liability in respect of the employee's conduct excluded by Clause 5.10(b) of the contract and/or 15(2)(c) of the Regulations?

It was unanimously agreed that a referral should be made to the CJEU on issues relating to the second question.

This referral is made on the assumption that "guidance by a member of the hotel's staff of Mrs X to the reception was a service within the 'holiday arrangements' which Kuoni had contracted to provide and that the rape and assault constituted improper performance of that contract."

What can we learn?

  • The referral to the CJEU on the second question should not necessarily be read as confirmation that the Supreme Court will find that the assault of Mrs X constituted an improper performance of the contract in the first instance. However, given the specificity of the guidance for the referral, it is suggestive that this is the case.
  • If the CJEU finds that a non-customer facing hotel employee can be considered a 'supplier of services' and that the statutory defence does not apply, leaving Kuoni liable, this will have large ramifications for the travel industry, potentially far widening the potential for claims to fall under the ambit of the Regulations.
  • This will result in a contradictory position meaning organisations such as Kuoni (as the package provider) are held to a higher standard for the actions of hotels and their employees outside of the UK, than hotels in the UK may be held for the same actions. The recent decision of Al-Najar, albeit involving an intruder to the hotel rather than a staff member, shows the inconsistency allowing the appeal would create.

We will continue to provide updates on the findings of the CJEU and the implications for the same.

This article was authored by Chris Murray, Partner, and Craig Evans, Senior Associate.